MDR McDermott International Inc

The Australian unit of McDermott International Inc. (MDR) has won a deepwater offshore contract for the Macedon Gas Project in Western Australia. Per the terms of the deal, the company would be involved in engineering and construction of the project along with structural transportation and installation of subsea infrastructure.

This happens to be McDermott’s first SURF (Subsea, Umbilicals, Risers and Flowlines) venture in Australia. The scope of the deal includes thorough engineering, procurement, fabrication, transportation and installation of a 47.7-mile long and 20-inch diameter pipeline.

The company will also set up subsea umbilicals and flexible flowlines using vessels from its fleet operating in water depths up to 590.5 feet.

Located in the Pilbara region, the $1.5 billion Macedon Gas Project is operated by BHP Billiton (BHP) with a 71.43% interest, while the remaining stake of 28.57% is controlled by Apache Corporation (APA). The project revolves around four offshore production wells, an onshore gas plant, sales gas pipeline and onshore infrastructure. With recoverable reserves of up to 750 billion cubic feet of gas, Macedon is expected to come online in 2013.

McDermott management remains highly upbeat regarding this endeavor in the Asia Pacific belt and stated that the contract will be included in its second quarter 2011 backlog. With this deal, the company expects to boost its presence in the subsea construction market and is confident of delivering proficient services within a specified time limit.

Houston, Texas-based McDermott is a leading global engineering and construction firm that has a diversified product portfolio, specialty manufacturing and service capabilities, and proprietary technological expertise. The company operates in most major offshore oil and gas producing regions, including the U.S., Mexico, Canada, the Middle East, India, the Caspian Sea and Asia Pacific.

We believe order flow and backlog for McDermott’s products and services will continue to be healthy and trend higher in the near-to-medium term. Additional positives include continued success on big awards, growing international operations and a solid balance sheet.

However, we expect the company’s growth potential to be restrained by fluctuating commodity prices, operational hindrances and a less diversified business profile. Hence, we maintain our long-term Neutral rating on the stock.

 
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